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How to Be Good

Image: Tatsuya Tanaka

There is a lot of discussion around leadership recently. Probably because prominent leaders are more interested in power than in leadership. Crises are the perfect opportunity for discussion and developing new ideas and eventually a new vision of leadership for the times to come. There is plenty of literature on the skills and the traits of the leader needed today and it is rather puzzling to see that despite all case studies and research most companies continue in the same fashion as before. Change is difficult as it forces us to ask difficult questions and most well established companies, institutions and systems would rather stay in their comfort zone. So although there is a wide consensus around the need to restructure to become more flexible, very few are prepared to take the leap even though the price for those who will not work towards the change could be catastrophic (and if you think this vision is rather gloomy take a look at what has been happening in politics in the last 5 years)

Let’s imagine for a moment that you are among the few companies whose CEOs are brave enough to go through a transformation and create circular integrated systems whose focus is on mentoring and learning and fostering a culture of diversity, inclusion and collaboration. All well. But here is a question that soon will be asked. What does your company stand for? You will probably be quick to answer drawing from the values your change has created. Collaboration, integration, maybe sustainability, you name it. Great achievement; but what about the added value? Still unsure? Let me clarify. Moving forward we cannot ignore that the concept of profitability will have to change. In the last 40 odd years it has been measured only by financial gains whose benefits rarely spread to those outside the boardroom or the trading floor. Things have been changing and in a society where the redistribution of wealth is rather poor, the values of companies, institutions and systems will be judged by their contribution to the common good.

Take financial institutions which are in the business of making money. The sustainability of their business model will be measured by the benefit that their profits can provide. The answer to the question “what is that you do” will have to do more with the long term goal of, say, offering more affordable mortgages and ultimately making people’s future less unsettled than the short term aim of making money.

Maybe you are familiar with the case of Vertex, a pharmaceutical company, which has patented Orkambi, a drug which could transform the lives of patients with cystic fibrosis. Vertex and British health officials have negotiated for quite some time but were unable to reach a deal to fund the treatment. The British government offered £500 million over 5 years and £1 billion over 10 years to have access to Orkambi and other CF medications, but the offer was too low. Vertex cites the big financial investment in the pharmaceutical research as a reason for the steep price. It is rather upsetting to learn that hundreds of patients have died since Orkambi won European approval in 2015 as a result of the struggle to find a balance between profit and sense of purpose.

Things are changing though. In The Investor Revolution, published in this month’s HBR, Robert G. Eccles points out how important in the last 5 years environmental, social and governance (ESG) issues have become for long term investors. Investments with portfolios of trillion dollars “have no hedge against the global economy; in short they have become too big to let the planet fail”. Under the combined pressure from shareholders and Millennials who make up most of the workforce and for whom the ESG are very important, companies feel obliged to commit to a statement of purpose. In the words of Larry Fink, CEO of Black Rock, the money-management firm, “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society”

When systems work towards restructuring and become less vertical and more circular there is an opportunity for the leaders of tomorrow to assist in shaping a bigger transformation in society by aligning their value with a more extensive sense of purpose. As Colin Mayer a professor at the University of Oxford and an expert on corporate purpose said in an interview, ”the purpose of a company is not just produce profits. It is to produce solutions to problems of people and planet and in the process to produce profits’

Could this be the rebirth of capitalism as a force for good?

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